After a frigid winter, there might just be a lot of built-up demand for cars, homes, and other products. This could kick-start the economy and mean big profits for your portfolio.

Now that one of the worst winters in recent history is finally coming to a close, there may be a lot of built-up demand waiting on the sidelines. Do you go shopping when you're snowed in? Do you go house-hunting when you can't feel your toes? Test driving new cars when there's ice on the roads? Probably not. However, the weather is warming up all over the nation and consumer spending is expected to increase rapidly. And, since spending represents about 70% of U.S. economic activity, this could easily provide a mid-year boost to the markets.

The dataIn the most recent data (February), spending climbed by 0.3%, but this is somewhat deceiving. Aside from higher utility spending -- which was a direct result of the colder-than-normal winter -- spending actually decreased for the month: durable goods (like cars) fell, while service (like utilities) grew. However, most economists project a strong rebound this spring and beyond.

What's coming next?Even though January and February were pretty slow in terms of economic growth, most economists are predicting a high rate for the rest of this year. After a less-than-stellar 1.9% gain in 2013, the National Association of Business Economics is predicting that the economy will grow by 3.1%, which would be the strongest since 2005.

Further supporting the prediction of a strong 2014 is the fact that the job market is strengthening rapidly. In January, there were 144,000 new jobs created, riising to 197,000 and 192,000 for February and March, respectively. Also, the average work week increased slightly in March, by 0.2 hours to 34.5. While this may sound small, it increases the average income of hourly workers, and more income translates to more spending.

The UCLA Anderson Forecast projects the economy to rebound strongly in the spring, and expects such businesses as automotive sales and home construction to make up for lost time. The report also predicts that GDP growth will remain around the 3% annual rate through 2016, and increased consumer spending is cited as one of the primary reasons.

How it could help your investmentsObviously, higher consumer spending will positively affect most of the market, because when people spend more, companies sell more products and hopefully earn higher profits. Also, higher spending is a very good indicator of higher consumer confidence, which is one of the best indicators that the overall economy is improving.

While higher consumer spending is a good thing for pretty much every company, it gives a particularly strong boost to the retail and banking sectors. Retailers will benefit for obvious reasons (they'll sell more stuff), and banks will benefit from increased lending activity. A lot of the delayed spending is expected to come in the form of home and automobile sales, and these are items that generally get financed.

It is definitely worth paying attention to the consumer spending numbers over the next couple of months, as it could give clues as to how these companies are doing before the next earnings releases make this public information. However, there is one thing to be careful about.

Beware of the "I" wordThe Federal Reserve set a target for 2% inflation, and the latest figures of a 1.1% rate are still well below that. But, if spending and overall economic activity do indeed pick up as predicted, inflation will be worth keeping an eye on. If it spikes, it could lead to sooner-than-expected interest rate hikes which affect different types of companies in different ways, but are generally not good. Higher inflation and higher interest rates usually mean less consumer spending, especially on higher priced items such as homes and cars.

So, the increase in spending should bring about higher revenue for the companies you invest in, at least for the near future. As long as you keep an eye on the spending and inflationary data and adjust your strategies accordingly, there are plenty of opportunities to profit from the spring/summer "thaw" in the markets.

Author

Matt brought his love of teaching and investing to the Fool in 2012 in order to help people invest better. Matt specializes in writing about the best opportunities in bank stocks, REITs, and personal finance, but loves any investment at the right price. Follow me on Twitter to keep up with all of the best financial coverage!
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